ISA rules are changing from April 2027, with the amount anyone under 65 can put in a Cash ISA reducing to £12,000 (the overall ISA allowance will stay at £20,000). But working out where to put your savings is about more than just allowances.
It’s about whether your savings are in the right place for what you need them to do.
Your savings checklist
Use these questions as a starting point.
- 1
Do I have enough easy-access cash?
Could you cover unexpected costs, such as urgent home repairs, a change in income or a family emergency, without needing to sell investments or borrow money?
- 2
Is my emergency fund enough, but not excessive?
A common rule of thumb is to hold around three to six months’ essential expenditure in an easy-access account. The right amount will depend on your income stability, family circumstances and what helps you feel comfortable.
- 3
Am I holding more cash than I realistically need?
Cash can feel reassuring, but holding too much for too long can reduce your money’s spending power if it does not keep pace with inflation.
- 4
Is my cash earning a suitable return?
If you have cash beyond your emergency fund, it’s worth checking whether it’s earning an appropriate rate and whether it still suits your goals.
- 5
Am I using the right tax-efficient allowances?
Savings interest may be taxable depending on your income. ISAs, pensions and other allowances may help, depending on your circumstances and what the money is for.
- 6
Are savings and investments held in the right names?
For couples and families, it can sometimes be worth looking at whether savings and investments are structured efficiently across the household.
- 7
Does each part of my money have a clear purpose?
Some money may need to be accessible. Some may be for planned spending. Some may be for longer-term goals. The right home for each pot depends on when you need it, your tax position and the level of risk you are comfortable taking.
This is where speaking to your adviser can really help.
1. Start with your emergency fund
Before thinking about investment returns or tax efficiency, it’s important to have money available for the unexpected.
This might include:
- a change in income
- urgent home repairs
- car costs
- family emergencies
- larger costs you had not planned for
A common rule of thumb is to hold around three to six months’ essential expenditure in an easy-access account.
But this is only a guide. The right level will depend on your employment situation, income stability, family circumstances and what helps you feel comfortable.
For this part of your money, accessibility and security usually matter more than return.
2. Think about your comfort cushion
Once you have an emergency fund, you may still want to hold extra cash.
For some people, this provides reassurance. It can help you feel more comfortable about future spending, retirement decisions or helping family.
But holding too much cash for too long can create a different risk. Inflation can reduce the spending power of money over time, meaning the same amount may buy less in future.
That doesn’t mean surplus cash should automatically be invested. It does mean it’s worth reviewing whether it’s still doing the right job.
Ask yourself:
- Is this money needed in the next few months?
- Is it for a known expense in the next few years?
- Is it there mainly for peace of mind?
- Could some of it be used for longer-term goals?
- Am I comfortable with the balance between access, security and growth?
3. Check whether your savings are tax efficient
Savings interest can be taxable depending on your wider income and tax position.
Some people can earn interest without paying tax on it, depending on their Personal Allowance, starting rate for savings and Personal Savings Allowance. Others may pay tax on some or all of their savings interest.
This is particularly important if you hold larger cash balances, have income from different sources or manage finances separately from a spouse or partner.
The right structure can depend on:
- your income tax band
- how much interest your savings generate
- whether you are using your ISA allowance
- whether assets are held individually or jointly
- whether one spouse or partner has unused allowances. Tax treatment depends on your individual circumstances, and the tax rules, rates and allowances may change in future.
4. Look at the family picture
Savings decisions are not always just individual decisions.
Where finances are shared, it can be useful to look at savings and investments across the household. That may include:
- Cash ISAs
- Stocks and Shares ISAs
- NS&I products where appropriate
- Junior ISAs for children
- pension contributions for longer-term planning
- how savings are split between spouses or partners
A coordinated family approach can sometimes improve after-tax returns and make better use of available allowances.
5. Make sure each part of your money has a job
A helpful way to review your savings is to divide them by purpose.
Money you may need soon
This should usually be accessible and secure.
Money you may need in the medium term
This may need a balance between access, certainty and return.
Money for longer-term goals
This may have more opportunity to grow, but only if the level of risk is appropriate for you.
The aim isn’t to chase the highest return on every pound. It’s to make sure your money is organised around your life.
Don’t worry if you’re not sure – that’s what advisers are for!
You may want to speak to your adviser if:
- you’re holding a large amount in cash
- you’re unsure how much emergency cash you need
- your savings interest may create a tax issue
- you have unused ISA allowances
- you want to help children or grandchildren
- your income, retirement plans or family circumstances have changed
- you’re unsure whether to save, invest or contribute more to a pension
The right answer will be personal to you. Good advice can help make sure your money is in the right place, for the right reason, at the right time.